Does A Healthy Supply Chain Imply Better Cash Flow?

Having a healthy cash flow is beyond earning more money than you spend or accumulating cash. It also involves sustainability, which is to make sure that your business can respond rapidly to new opportunities and challenges. Massive, ongoing expansion isn't always a good thing. Many businesses' growth graphs are heading up, but they are at a dangerous place. Negative cash flows prevent such companies from being prepared to seize a genuinely profitable opportunity when it arises, making these companies vulnerable to any disruption in their business operations. In order to build sustainable and resilient supply chains, businesses are turning to supply chain finance solutions to stabilize liquidity and their working capital cycle. Maintaining financial liquidity is essential for companies to address supply and demand issues. To enable businesses to manage their working capital more flexibly and at a more affordable interest rate, supply chain financing (SCF) builds on traditional trade finance solutions.

Suppliers need capital to maintain smooth operations. At any point in the cash cycle, suppliers can tap into a robust SCF system, leveraging the credit risk of their larger partners (aka “Anchor”) to ensure liquidity which in turn ensures a steady business volume. All of this points towards a healthy cash flow, thus maintaining their financial viability.

A company must respond swiftly to shifting circumstances and new opportunities in order to experience healthy growth. A corporation with strong cash flow may seize fresh opportunities, tackle unanticipated difficulties, and take the risks necessary for positive-sum growth. Sustained, healthy growth is not feasible without these skills. Any company's cash flow is supported by its supply chain operations. Most businesses will experience a supply chain crisis every four to five years, according to a recent National Center for the Middle Market analysis on resilient supply chains. During supply chain problems, having a healthy cash reserve helps keep you afloat. Besides, streamlining and automating supply chain operations can further enhance resilience and bring in more efficiencies. .

If the supply chain is changed, the following adjustments can aid in effective cash flow management:

"Just in case” Inventory: Inventory management is a crucial area where many businesses can perform better. Technology may assist your business with more than simplifying inventory management processes; many companies are implementing programs to streamline accounts payable and promote collaboration on purchase orders. Business users can prioritize paying suppliers who provide early payment discount by automating the accounts payable process, enhancing the business' understanding of cash flow.

Supply chain collaboration improvement: There are cases when there is miscommunication in the planning systems, which leads to slow and unreliable communication chain. By improving this area, businesses can strategize from poor communication collaboration with transparent end-to-end collaboration. Actions can then be performed in real time based on data insights rather than being reactive after the event.

Supply chain management includes the cash flow component by nature. It will either make things move along smoothly or bring everything to a standstill. Global traders require the same flexibility and resiliency in their cash management techniques as in their supply chain management strategies. Finance divisions have been in charge of managing cash flow and B2B payments. When it comes to financial strategy, supply chain managers need an efficient and digitalized workflow, so that both teams can communicate and plan together. In order to promote data sharing in agile ways, there must be buy-in from everyone inside the supply chain ecosystem.

Businesses can improve cash flow by selecting the appropriate partners, effectively anticipating and adapting to market and consumer demand changes, and minimizing supply chain disruptions. Supply chain disruptions have a domino effect, affecting every junction throughout the supply chain. Positive cash flow is also a result of implementing more economical strategies to stop unnecessary spending and lowering overhead expenses.